                                 CODE OF VIRGINIA

DISCHARGE OF ACCOUNT DEBTOR ON CONTROLLABLE ACCOUNT OR CONTROLLABLE PAYMENT
INTANGIBLE (§ 8.12-106)

a. Discharge of account debtor. An account debtor on a controllable account or
controllable payment intangible may discharge its obligation by paying:

   1. the person having control of the controllable electronic record that
   evidences the controllable account or controllable payment intangible; or

   2. except as provided in subsection (b), a person that formerly had control of
   the controllable electronic record.

b. Content and effect of notification. Subject to subsection (d), the account
debtor may not discharge its obligation by paying a person that formerly had
control of the controllable electronic record if the account debtor receives a
notification that:

   1. is signed by a person that formerly had control or the person to which
   control was transferred;

   2. reasonably identifies the controllable account or controllable payment
   intangible;

   3. notifies the account debtor that control of the controllable electronic
   record that evidences the controllable account or controllable payment
   intangible was transferred;

   4. identifies the transferee, in any reasonable way, including by name,
   identifying number, cryptographic key, office, or account number; and

   5. provides a commercially reasonable method by which the account debtor is to
   pay the transferee.

c. Discharge following effective notification. After receipt of a notification
that complies with subsection (b), the account debtor may discharge its
obligation by paying in accordance with the notification and may not discharge
the obligation by paying a person that formerly had control.

d. When notification ineffective. Subject to subsection (h), notification is
ineffective under subsection (b):

   1. unless, before the notification is sent, the account debtor and the person
   that, at that time, had control of the controllable electronic record that
   evidences the controllable account or controllable payment intangible agree in
   a signed record to a commercially reasonable method by which a person may
   furnish reasonable proof that control has been transferred;

   2. to the extent an agreement between the account debtor and seller of a
   payment intangible limits the account debtor&#8217;s duty to pay a person
   other than the seller and the limitation is effective under law other than
   this article; or

   3. at the option of the account debtor, if the notification notifies the
   account debtor to:

A. divide a payment;

B. make less than the full amount of an installment or other periodic payment;
or

C. pay any part of a payment by more than one method or to more than one person.

e. Proof of transfer of control. Subject to subsection (h), if requested by the
account debtor, the person giving the notification under subsection (b)
seasonably shall furnish reasonable proof, using the method in the agreement
referred to in subsection (d)(1), that control of the controllable electronic
record has been transferred. Unless the person complies with the request, the
account debtor may discharge its obligation by paying a person that formerly had
control, even if the account debtor has received a notification under subsection
(b).

f. What constitutes reasonable proof. A person furnishes reasonable proof under
subsection (e) that control has been transferred if the person demonstrates,
using the method in the agreement referred to in subsection (d)(1), that the
transferee has the power to:

   1. avail itself of substantially all the benefit from the controllable
   electronic record;

   2. prevent others from availing themselves of substantially all the benefit
   from the controllable electronic record; and

   3. transfer the powers specified in paragraphs (1) and (2) to another person.

g. Rights not waivable. Subject to subsection (h), an account debtor may not
waive or vary its rights under subsections (d)(1) and (e) or its option under
subsection (d)(3).

h. Rule for individual under other law. This section is subject to law other
than this article which establishes a different rule for an account debtor who
is an individual and who incurred the obligation primarily for personal, family,
or household purposes.

HISTORY: 2024, c. 652.